Energy
MEA line crews conduct routine maintenance on their system in Palmer.

MEA

Electrifying the Railbelt
Planning for a transco moves forward
By Julie Stricker
W

hen a Fairbanks resident flips on a light, the electricity that powers it may have been generated 600 miles away at the Bradley Lake Hydroelectric facility near Homer. Or it may have come from a natural gas facility near Anchorage, or one of Golden Valley Electric Association’s (GVEA) coal-fired plants in Healy.

Most of Alaska’s population lives along the Railbelt, which is served by six utilities. Although they are all linked, they operate individually. But electricity demand is expected to rise in coming years and long-term plans are needed, says Chris Rose, executive director of the Renewable Energy Alaska Project.

“It’s a dynamic situation,” Rose says. “Electric vehicles could really change the demand on the electric grid in the Railbelt. It’s gonna happen. The electric system has to be ready for it. We need to have a regional electricity and generation plan, which we do not have. All six utilities do their planning individually, which is very inefficient and suboptimal. We have a regional grid, one that is physically connected, but we don’t operate it as a regional grid. We don’t plan for it on a regional basis.

“And it’s a big problem.”

It’s a problem that state legislators and regulators have been working on for a number of years, Rose says. A solution may be in sight.

Six different utilities own and operate the generating facilities and transmission lines in the Railbelt: GVEA, Matanuska Electric Association (MEA), Chugach Electric Association, Municipal Light & Power, Homer Electric Association, and the City of Seward. Several attempts have been made over the years to consolidate and streamline the utilities, with little success. It’s not a matter of pooling resources, it’s more about making sure supply and demand for electricity across the grid is balanced—with costs and risks divided equitably—and appropriate access given to independent power producers.

MEA transmission lines during construction
MEA transmission lines during construction near the Eklutna Generation Station power plant on the Glenn Highway.

MEA

Right now, with each utility overseeing its own portion of the grid, getting power from Bradley Lake to Fairbanks, for instance, involves “rate pancaking.” Those stacked transmission tariffs could make it less feasible for independent power producers to develop lower-cost renewable energy solutions. And, since each utility puts its customers first, long-term planning is difficult because there is little incentive for one utility to invest in a project that doesn’t directly benefit its customers.

In 2015, the Regulatory Commission of Alaska (RCA) asked the Railbelt utilities to work together to streamline electrical service. One option is to form a single transmission company, or transco. This utility would oversee the transmission of power over the Railbelt and would not own any generation assets. The transco would “operate, maintain, plan, and construct electric transmission lines in and around the existing service territories of the Railbelt utilities,” according the utilities’ progress report to the RCA in 2015.

Wisconsin-based American Transmission Co. put together a similar project in the Midwest and is interested in doing the same in Alaska. Over the past four years, American Transmission has been working with the Railbelt utilities and state regulators. Despite several delays, Eric Myers, manager of business development for American Transmission, said in January that progress was looking positive.

“The first quarter of this year is going to be an important period of time for this effort,” he says.

“All six utilities do their planning individually, which is very inefficient and suboptimal. We have a regional grid, one that is physically connected, but we don’t operate it as a regional grid.”
—Chris Rose
Executive Director, REAP

Over the past eight months, each of the Railbelt utilities’ respective governing boards have approved filing of a Certificate of Public Convenience and Necessity (CPCN) to form a transco, subject to certain conditions, including a final operating agreement consistent with the terms discussed to date and simultaneous progress on a Railbelt-wide reliability organization, Myers says.

Each of the utilities is participating in discussions to finalize a CPCN application, according to Myers. Each utility will then evaluate the final application before it is filed. After that, RCA will review the application and supporting materials to make sure they are complete and put it before the public, an effort that could take up to six months, Myers says. RCA will grant the certificate if it determines the transco “is in the public’s convenience and necessary to serve the public interest,” Myers says.

Many Layers

There are several layers to any agreement, says Julie Estey, director of public relations for MEA. First is the establishment of a transco, which would oversee the Railbelt transmission system and provide one transmission tariff for entities that want to use the transmission system. Myers describes it as an “unlimited minutes cell phone plan” instead of the old way of paying for long-distance calls by the minute, with different rates for different times and locations.

“Merging those into one tariff would simplify the process for power sellers, but does not reduce the costs that need to be recovered,” Estey notes.

Myers says setting a single tariff makes it more convenient to settle those transactions between utilities but also reflects the way the transmission network looks.

“Running more or less power doesn’t really change the cost of operating the system,” he says. “It’s like a glass, and it works just as well at three-quarters capacity as it does at one-quarter capacity.”

MEA believes a transco would benefit the Railbelt, Estey says. “However, we also believe there needs to be a separate organization that plans and prioritizes the projects based on reliability standards and cost/benefit analysis,” she says.

Substations like the Hospital substation in Palmer reduce high voltage power carried by transmission lines down to a lower voltage that can be delivered to homes and businesses.

MEA

This organization is also in development: the Railbelt Reliability Council (RRC). It would handle the development and enforcement of reliability standards (which drive the need for transmission projects), open-access protocols for independent power producers, and integrated resource planning.

“Because any construction would impact rates for homes and businesses throughout the Railbelt, the RRC would provide a check and balance function to ensure the transco is building prioritized projects based on a cost/benefit analysis. However, the RRC’s makeup and overall jurisdiction are still undecided.

As of January, MEA was still in discussions with the other Railbelt utilities and American Transmission “to ensure the transco benefits exceed the costs,” Estey says.

“The combined transco and Railbelt Reliability Council will lower costs to consumers by stabilizing and rationalizing transmission pricing and increasing grid reliability and resiliency.”
—Lee Thibert, CEO
Chugach Electric

The RRC is also an essential piece for Chugach Electric Association.

“The combined transco and Railbelt Reliability Council will lower costs to consumers by stabilizing and rationalizing transmission pricing and increasing grid reliability and resiliency,” says Chugach Electric CEO Lee Thibert.

Economic Dispatch

One hurdle is the gulf between generation costs along the grid. In Fairbanks, a resident pays about 20 cents per kilowatt hour. Bradley Lake hydro costs are about 4 cents per kilowatt hour. The newer natural gas facilities in Southcentral are somewhere in between.

However, it doesn’t make sense to just use the lowest cost power, because at this time, Bradley Lake doesn’t generate enough power for the entire Railbelt, Myers says. What makes more sense is to balance generation across the grid so that each power plant is generating electricity at its optimum level.

Using the analogy that a car is more fuel-efficient at highway speeds than in stop-and-go traffic, Myers says that if a power plant is most efficient at 55 mph, but only needs to operate at 35 mph, there is a benefit to customers and those whose alternative cost of power is more expensive to continue to operate at 55 mph and send the extra power down the line.

“So not only does it keep them from running their more expensive power plant, but it allows you to run your power plant at optimal speed,” he says. “That’s economic dispatch.”

It creates positive externalities to fully load a unit, he says. And by working together, the Railbelt utilities can maximize their efficiencies and minimize their costs.

Infrastructure Improvements

In 2017, the Alaska Energy Authority (AEA) identified a list of projects needed to bring Railbelt infrastructure up to peak reliability and efficiency standards. The Railbelt Transmission Plan includes $885 million in projects, about half of which would improve energy transmission from AEA’s Bradley Lake hydro plant to Anchorage, the Mat-Su Valley, and Fairbanks.

Currently, Bradley Lake is capable of outputting 120 megawatts of power, but the Kenai Peninsula’s dated transmission system, parts of which are more than fifty years old, limits it to 65 megawatts, the report says. The proposals would add redundant systems between the Kenai Peninsula and Chugach Alaska’s Beluga power plant via a subsea high-voltage direct current line. Additional lines would add redundancy between Point MacKenzie/Willow and Willow/Healy.

Southcentral utilities balked, saying the upgrades could be done at a much lower cost.

Katie Conway, AEA’s director of external affairs, says, “The list of projects identified in the AEA transmission study, finalized in 2017, were those required by the set of reliability standards in the Railbelt region at the time the study was undertaken. Reliability standards contain within them a set of transmission planning standards which are followed to develop a list of projects such as those found in the transmission study.

Transmission lines
Transmission lines like this one near Palmer are necessary to deliver large quantities of high voltage power from power plants to the communities they serve.

MEA

Transmission lines like this one near Palmer are necessary to deliver large quantities of high voltage power from power plants to the communities they serve.

MEA

“One of the traditional roles of a transmission company in the Lower 48 is to keep this type of transmission planning document up to date and current. We anticipate that a Railbelt transco would follow the same process that AEA used in developing the list of projects in the 2016 transmission study to guide long-term Railbelt planning efforts.”

Since the completion of the transmission study in 2017, there have been additions and deletions to the generation portfolio in the Railbelt region, Conway notes.

“It is reasonable to assume that there could be modifications to the plan if it were to be revised today,” she says.

A typical process is for interconnected utilities to follow a hierarchal structure of planning and operating standards. In Alaska, this hierarchy currently has the transmission planning standards contained wholly within the set of aforementioned reliability standards. 

A transco would be the entity responsible for maintaining this set of transmission planning documents. 

“Often these documents have immediate, short term, and long term planning horizons,” Conway says. “They are updated on an annual basis and brought forward to a regulatory body with recommendations on how to proceed. This is how long-term planning is typically done and would benefit the ratepayers in the Railbelt through a consistent, transparent process.”

Ideally, says Myers, a network needs to be able to handle peak demand, similar to how a good road system can handle rush hour and still enable a fire truck to get through in an emergency.

Dividing the Costs

Another question is how to equitably share the cost of the transmission between utilities.

Basing the equation on peak demand times, Myers says the transco would look at everyone’s load on the system at peak use.

“Work now is focused on ensuring each party understands its role and associated costs and is confident that the transco is being structured properly to achieve its intended goal—specifically, the coordinated operation and improvement of the Railbelt’s network of transmission assets to maintain and improve reliability and facilitate the efficient use of the Railbelt’s electric generation resources.”
—Eric Myers
Manager of Business Development
American Transmission

“That’s how we divide up the total network cost for the year because that’s what really determines what we choose to build,” he says. “Say Utility A accounts for 15 percent of that peak usage, so they will pay on an annual basis for 15 percent of the cost of the network.”

At this point, Myers says, the “big questions” have been on the table and under discussion for quite some time.

“Work now is focused on ensuring each party understands its role and associated costs and is confident that the transco is being structured properly to achieve its intended goal—specifically, the coordinated operation and improvement of the Railbelt’s network of transmission assets to maintain and improve reliability and facilitate the efficient use of the Railbelt’s electric generation resources.”